Quotes About the State of the US Economy

Here are some of my favorite quotes from the recent Buttonwood conference held in New York City as presented by the Bearish News Blog. Note: some quotes are paraphrased.

Elizabeth Warren, Chair of TARP oversight panel and Professor of Law at Harvard:
The reason banks lost confidence in each other is because they looked at their own books. (in reply to a question on the role a “loss of confidence” played in the crisis)

We need the toughest possible accounting standards… You can’t trust anyone’s books these days.

What we have confidence in is the fact that big institutions will be bailed out. (in reply to a question about the importance of confidence)

Tim Geithner, Treasury Secretary:

We’ve got unsustainable deficits over a five- to 10-year window.

We have been ‘remarkably effective’ in stabilizing the financial system.

We need a way to put them [too big to fail institutions]… how can I say this, ‘out of existence’

The emerging world will be a much stronger source of strength, it is showing resurging strength that will support us

George Soros, chairman of Soros Fund Management (arguably the most successful currency trader in history):

The US will remain a drag on the world economy. World growth is bound to be flat for a number of years.

Yes. (in response to Michael Panzner’s question: Has Wall Street captured the U.S. government, as Simon Johnson argued?).

Niall Ferguson, Laurence A. Tisch Professor of History at Harvard University. These quotes were taken during a panel titled The geopolitical shift: Is this the end of US finance?

In 10 years we will all look back and say, ‘that was when it happened, the shift of power from West to East’

The problem of being a declining empire doesn’t have a solution (in response to a repeated question on how to fix America’s ongoing problems)

China is the Germany of our time, they are increasingly nationalistic and economically powerful (referring to post-WWI Germany)

Diane Garnick, Investment Strategist at Invesco (during a session on executive compensation in finance):

The credit crisis may be over, but the credibility crisis is just getting started

Our most important resource is human capital, and we won’t maximize our potential as long as such a large percentage of our the top talent is attracted to finance (paraphrased, it was a long sentence)

Compensation in the Western World is a bit like Dolly Parton, there is a huge bubble at the top (Diane prefaced the simile by mentioning that the joke always bombs in Asia. For the record, it basically bombed to the ~40 people in this session, but I liked it).

Jeffrey D. Sachs, Columbia University Economist and Director of the Earth Institute

Wall St. is patting themselves on the back for making lots of money, for making profits on fantastically easy monetary policy

They [Goldman and other investment banks] have been allowed to “feed at the Fed” on loose money, and profited from it.

Richard Bookstaber, Risk Management expert and author of A Demon of our own Design. The following quotes were from a debate on this proposition: Financial innovation boosts global growth. Bookstaber was on the con side.

Derivatives are the current weapon of choice for gaming the system

Derivatives create risk, not protect against it

I’m all for capitalism, but Wall St. is only half-capitalist. When things are good, they’re capitalists. When things turn bad, they become socialists.

Jeremy Grantham, Chairman of Grantham Mayo Van Otterloo (aka GMO, a firm with $89 billion under management. His role as a money-manager make his comments that much more interesting)

Finance produces nothing of value, no widgets. All we do is shuffle money around and collect fees.

The more complex and opaque the [financial] instrument, the more likely that it is ripping people off.

Larry Summers, Director of the White House’s Economic Advisory Council, former Treasury Secretary under Clinton:

We need financial regulation that recognizes human nature, trying to change it is pointless. Even in the annals of speculation, there are few successful careers based on predicting bubbles and going the other way (short).

To be sure, it is easy to predict bubbles. Just predict them all the time. But that is surely not a realistic view to regulate based on.